Summer Trading

  • July 10, 2002
  • Dave Floyd


As I had mentioned in


my service last night,
trading was pretty lame yesterday. Most of the moves were very erratic,
more of a steady grind lower, rather than the quick decisive moves that I like
to see. Even some of the swing trades off of the slightly longer-term charts did
not pan out. 

Well, this is
Summer trading my friends, not much you can do, just remain very selective. In
this environment it will not take much to re-ignite the speculation and fear. So
be patient, and if you are in need of a little time off, go for it, the market
will always be there tomorrow.

On Monday, I had
mentioned United Technologies
(
UTX |
Quote |
Chart |
News |
PowerRating) as a
long-term play on the long side. The chart can be seen below with my commentary
regarding the price action since.


I ran this article
last year and I had great response to it, so I am going to re-run it
again. Given the state of the markets and perhaps your stamina, this may
resonate with you. It definitely does for me now that my sleep pattern seems to
have been permanently altered. At any rate, enjoy, and be selective or walk away
for a day or so.

While this will
probably resonate with more seasoned traders, it is critical that newer traders
fully understand the importance of time-off and frame of mind when trading. I am
writing this at a time when I am experiencing a “burn out” phase combined with a
time where there are a lot of things going on with the business that require
more of my attention. 

The key for newer
traders is recognizing when you are experiencing this and secondly having the
ability to get up and walk away for a few days. Too often as traders, we fear
that we will miss great trading opportunities if we do not show up each and
every day. While that may be true, I look at it this way: When I am not trading
well, I start to miss trades and not see great trade setups that normally I
would pounce on. Secondly, I start to become very apprehensive about my entry
points and frequently get in too late, rather than being “mechanized” to simply
react and go for the throat on my entry and exit points. In short, if I am not
trading well, the markets could be very volatile (great for daytrading), yet it
won’t benefit me in any way, since I am less than 100%.

How does a new
trader identify these periods without confusing them with just laziness or an
excuse to take a vacation? I suppose the answer will be different for each
person, but I feel that there are certain signs that are probably quite common
among all traders:


  1. Noticing that your performance is suffering

  2. Missing trades that you normally would
    take

  3. Hesitating on entry points, in short,
    over-thinking the trade (paralysis by analysis)

  4. When you get up in the morning, do you
    have that “Eye of the Tiger” and supreme confidence?

Remember that
there is no reason to feel bad about experiencing any of these moods or
symptoms, it is normal for traders. Traders are under so much stress and operate
at such heightened states of awareness longer than most people do in a day, that
their bodies just can’t sustain it after a while. Joe DiNapoli, of DiNapoli
Levels and Fibonacci numbers fame, suggests that traders take a week off every
two to three months. You will be surprised at how refreshed you are when you get
back. More importantly, your clarity will be back. Suddenly you are seeing all
the nuances of the market that you were missing before that allowed your trading
to excel.

One other aspect
to keep in mind is distractions. It is so easy to get sidetracked by the ‘phone,
other people, etc. Put yourself in an environment where you can isolate yourself
from these distractions.

Key
Technical Numbers: (futures)

S&Ps Nasdaq
974.16       1027
963      1014
951.8  1006
943      989
935   980
921   959
  953

As always, feel free to send me your
comments and questions. See you in
TradersWire.


Dave